For decades in America, food factories and distribution facilities have moved to suburban sites, in search of inexpensive industrially zoned land, easy truck loading, and proximity to interstate freeways. Now, disinvestment in the urban fringe, decline in older neighborhood industrial buildings, foreclosures, and job losses from the Great Recession have created opportunities for smaller food processors to expand at lower cost.

Take Classic Foods, a local gourmet foods manufacturer and distributor in Portland, Oregon. Its main products include pasta, spice blends, sauces, and soup bases. It also imports specialty meats, cheeses, and other foods, which it provides wholesale to 500 restaurant clients in Oregon and Washington. Classic was located in a 10,000-square-foot warehouse one mile east of downtown Portland just south of Interstate 84. It had only a 1,200-square-foot kitchen to serve its clients, and truck loading space for pickup and delivery to its customers was minimal.

Conventional economics seemed to favor a low-cost tilt-up building in an industrial park. But founder and owner Jake Greenberg loved biking to work, and wanted to continue to serve close-in restaurant and hotel owners. He calculated that Classic could reinforce its brand by marketing prepared foods with sustainably farmed, organic ingredients to an urban community.

Greenberg soon found a facility to support these aspirations in the form of a 50,000-square-foot old art deco structure in disrepair in the Woodlawn neighborhood, only three miles north of Classic Foods’ old location and only two miles from his house. Constructed in 1932 as an ice house, the building later operated as a brewery after prohibition and, since 1948, was home to a paper box manufacturing company. The owners of the box company had the property on the market at $2.9 million only 12 months earlier, but they were nine months behind on mortgage payments and about to lose the property - and with it their three-generations-old family business - to foreclosure.

Greenberg struck a deal that benefited both parties. By paying the owners $1.4 million, he acquired a building five times larger than his existing one at a price of just $28 per square foot - far below replacement cost, not even counting the value of the 1.53-acre site that gave him the space to park his fleet of delivery trucks. The sale cleared the box company’s debt and gave it adequate resources to maintain the business and relocate it to a smaller, less-expensive facility that better met its needs. It also allowed Greenberg to expand Classic Foods, more than quintuple the size of its kitchen, extend its product line, and add to its customer base.

There were problems. The building had been neglected for decades and needed significant improvements. The roof had so many leaks that buckets was required to catch all the water when it rained. The mechanical, electrical, and plumbing systems all dated to the 1960s or earlier, and many of the windows, floor coverings, pipe wrapping, and other building materials were laced with asbestos or contained lead-based paint.

Greenberg brought in Joshua Fuhrer, a recent graduate of the Portland State University, to help redevelop the building. The kitchen became a 6,480-square-foot exhibition kitchen that was moved near the front of the building. Most equipment in the kitchen was placed on wheels to maximize flexibility. The kitchen has a 50-foot sheer glass wall along a 2,340-square-foot public community gallery lined on the other side by a bank of 11 five-foot-wide-by-12-foot-tall windows that fill both the gallery and kitchen with daylight.

Glowing windows at nighttime events transform the gallery into a community center for the now-revitalizing neighborhood. The gallery space serves as a place for local artists to display their work, for the neighborhood association and other community groups to hold their monthly meetings, and for local nonprofit organizations to hold fundraising events, free of charge. Recent events have included two fashion shows benefiting local schools, cooking classes and demonstrations, and pasta meals for children on free and reduced-price lunch programs.

Adjacent to the gallery is a 1,407-square-foot retail space. Clients, retail customers, and gallery patrons look through the floor-to-ceiling glass wall into the commercial kitchen where cooks pull fresh pasta from Italian machines and drape it over large racks to dry. This allows passersby to see firsthand the steps of food production from raw materials to finished linguini and ravioli. Urban decay had turned the area into a food desert, but Classic’s retail access at manufacturer’s prices helps address the lack of food access for neighborhood residents while creating new revenue streams and building brand loyalty in the community.

An 800-square-foot lower patio, widened sidewalks, and a parking area, in addition to a terrace, were built to be able to serve a local farmers market for the neighborhood on weekends. An herb garden was planted adjacent to the terrace to create edible landscaping.

The project, which incorporates a variety of green building practices, materials, and processes, is in the final stages of commissioning and qualifies for Leadership in Energy and Environmental Design Platinum certification, making it the first manufacturing facility in Oregon to achieve this designation.

The $5 million project’s total development cost of $115 per square foot included the 66,500 square feet of land and all its improvements, 43,458 square feet of improved usable building area, all hard and soft redevelopment costs, and all the new equipment in the building. This was significantly less than the cost would have been for a suburban counterpart. The project also yielded benefits for the community and the ability to market and expand the Classic Foods brand from a sustainable urban location.

All photos courtesy of Classic Foods.

Adapted and reprinted with permission from Urban Land, the online publication of the Urban Land Institute; copyright 2012 by the Urban Land Institute.